Structural Reforms and External Rebalancing

52 Pages Posted: 5 Sep 2017

See all articles by Alexander Culiuc

Alexander Culiuc

International Monetary Fund (IMF)

Annette J. Kyobe

International Monetary Fund (IMF)

Date Written: August 2017

Abstract

Empirical research on structural reforms has focused primarily on their impact on growth and productivity. Yet an often-invoked rationale for structural reforms is their impact on external adjustment. This paper finds little evidence that structural reforms improve the current account in the short run, but they can increase the responsiveness and resilience of the economy to external shocks. In particular, elasticities of exports with respect to the real effective exchange rate increase with some structural indicators, suggesting that structural reforms facilitate the reallocation of resources to the tradable sector in response to a negative external shock. The paper concludes that structural reforms, while not having an immediate positive impact on the current account balance, can be an important complement to traditional macroeconomic adjustment.

Keywords: Current account, Exports, structural reforms, REER, real exchange rate, Country and Industry Studies of Trade, Trade and Labor Market Interactions, Open Economy Macroeconomics, Public Policy

JEL Classification: F14, F16, F32, F41, J68, O19

Suggested Citation

Culiuc, Alexander and Kyobe, Annette J., Structural Reforms and External Rebalancing (August 2017). IMF Working Paper No. 17/182, Available at SSRN: https://ssrn.com/abstract=3030775

Alexander Culiuc (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Annette J. Kyobe

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

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